How Growing Demand For SUVs and Crossovers Can Aid Lear Corporation’s Business

-10.27%
Downside
145
Market
130
Trefis
LEA: Lear logo
LEA
Lear

Demand for SUV’s and Cross-overs has increased steadily over the years and the share of these vehicles in the global market is likely to increase to 35% by 2021 from 13% in 2016. Crossover was the biggest segment in the US car market in November 2017. This trend towards bigger and premium cars is likely to benefit Lear Corporation (NYSE:LEA). Bigger cars such as SUVs and Crossovers command premium content per vehicle (premium/ additional seating and more advanced electric content) leading to higher revenues for Lear. Content per SUV is estimated at $1,000 as against $700 average content per vehicle. This trend is likely to positively impact Lear Corporation’s revenues.

Our interactive model analyses the impact of an accelerated growth in revenues of both its segments on Lear Corporation’s valuation.

You can click here to access this model and modify the charts below:

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Our base case assumes a steady growth in the revenues of both the Seating segment and the E-Systems segment of Lear Corporation. However, an accelerated growth in revenues — higher growth by 100-300 bps — can significantly impact the valuation of Lear Corporation and lead to a nearly 10-15% upside in our price estimate.  The shifting vehicle portfolio in favor of SUVs and Cross-overs can act as a catalyst for Lear Corporation’s revenue growth.

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